SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Auto-trol Technology Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Allyson S. Kissell
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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AUTO-TROL TECHNOLOGY CORPORATION
12500 NORTH WASHINGTON STREET
DENVER, COLORADO 80241-2400
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The annual meeting of shareholders of Auto-trol Technology Corporation (the
"Company") will be held on Tuesday, January 27, 1998, at the Company's
headquarters, 12500 North Washington Street, Denver, Colorado, at 10:00 a.m.
Mountain Standard Time. At the meeting, the shareholders will consider and act
upon the following matters:
1. The election of directors to serve until the next annual meeting or
until their successors are duly elected and qualified.
2. The approval and adoption of a proposal to amend the Company's Special
Purpose Stock Option Plan and Incentive Stock Option Plan to increase
the number of shares of Common Stock available for grant collectively
under the Plans.
3. Such other business as may properly come before the meeting.
Only shareholders of record at the close of business on December 9, 1997, are
entitled to notice of, and to vote at, the meeting.
By Order of the Board of Directors
Allyson S. Kissell
SECRETARY
Denver, Colorado
December 22, 1997
IT IS IMPORTANT THAT ALL SHAREHOLDERS BE REPRESENTED AT THE MEETING. WE URGE
YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE, WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING. THE PROXY SHOULD BE RETURNED IN THE
ENCLOSED POSTAGE PREPAID ENVELOPE. IF YOU DO ATTEND THE MEETING, YOU MAY THEN
WITHDRAW YOUR PROXY. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS
EXERCISE.
AUTO-TROL TECHNOLOGY CORPORATION
12500 NORTH WASHINGTON STREET
DENVER, COLORADO 80241-2400
________________________________________________________________________________
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 27, 1998
This Proxy Statement (the "Proxy Statement") is furnished to shareholders of
Auto-trol Technology Corporation (the "Company") in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
Annual Meeting of Shareholders to be held on Tuesday, January 27, 1998, at the
Company's headquarters, 12500 North Washington Street, Denver, Colorado, at
10:00 a.m. Mountain Standard Time, and at any adjournment thereof. The
approximate mailing date of this Proxy Statement and the accompanying proxy is
December 22, 1997. ANY PROXY MAY BE REVOKED IN PERSON AT THE MEETING, EITHER BY
SUBMITTING A PROXY DATED LATER THAN THE PROXY TO BE REVOKED OR BY NOTIFYING THE
SECRETARY OF THE COMPANY IN WRITING AT ANY TIME PRIOR TO THE TIME IT IS VOTED.
In addition to the solicitation of proxies by mail, officers and other
representatives of the Company may solicit the return of proxies by telephone,
telegraph or personal contact. The Company will bear the expense of preparing,
printing, assembling and mailing this Proxy Statement and accompanying material
to its shareholders and will reimburse banks, brokerage firms and other
custodians, nominees and fiduciaries for reasonable expenses incurred by them in
forwarding proxy solicitation material to beneficial owners.
All references in this Proxy Statement to the Company's last fiscal year
refer to the period from October 1, 1996 to September 30, 1997.
The list of shareholders of record on December 9, 1997, will be available
for review at the Company's headquarters for ten (10) days prior to the annual
meeting.
SHAREHOLDER PROPOSALS
Subject to the rules of the Securities Exchange Act of 1934, any shareholder
who intends to submit a proposal for action at the annual meeting of
shareholders must be a record or beneficial owner of at least one percent (1%)
or $1,000 in market value of securities entitled to be voted at the meeting and
must have held such securities for at least one year. Further, the shareholder
must continue to own such securities through the date on which the meeting is
held. Currently, the 1998 annual meeting of shareholders is scheduled to be
held on January 26, 1999. To be considered for inclusion in the proxy material
for the next annual meeting, proposals must be received by the Secretary of the
Company at 12500 North Washington Street, Denver, Colorado 80241-2400 on or
before September 30, 1998.
1
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
The Company's outstanding voting stock consists of Common Stock. Only
holders of Common Stock of record at the close of business on December 9, 1997
(the "Record Date") will be entitled to notice of, and to vote at, the meeting.
On the Record Date there were 9,309,164 shares of Common Stock outstanding.
Each outstanding share of Common Stock is entitled to one vote on each matter to
be acted upon at the meeting.
A majority of the Company's outstanding voting Common Stock, represented in
person or by proxy, is necessary to constitute a quorum to take action at the
meeting. Cumulative voting is not permitted. If a quorum is present at the
meeting, the simple majority vote of shares voting is required for election of
the directors. Abstaining votes and broker non-votes will not be counted as
votes for or against a proposal, and will have no effect on the result of a
vote, although both will be counted towards the presence of a quorum.
The following table sets forth, as of November 30, 1997, information with
respect to beneficial ownership of the Company's Common Stock by each person
beneficially owning more than five percent (5%) of the outstanding shares of
such Common Stock:
SHARES PERCENT
BENEFICIALLY OF
TITLE OF CLASS NAME AND ADDRESS OWNED CLASS
- -------------- ---------------- ------------ -------
Common Stock Hillman Trusts(1) 1,843,922(2) 20%
Common Stock Howard B. Hillman(1) 9,112,841(2)(3) 98%
Common Stock Venhill Limited Partnership(1) 6,599,152(4) 71%
(1) The address is c/o Howard B. Hillman, Taconic Group, 158 Main Street, New
Canaan, CT 06840.
(2) The Hillman Trusts are comprised of thirteen separate trusts holding in
aggregate 1,843,922 shares. These shares are also included in the total
for Howard B. Hillman, President, CEO and a director of the Company. Under
the terms and conditions of the Trusts, Mr. Hillman has sole voting and
investment powers for one Trust which includes 1,000 shares; shared voting
and investment powers for eleven Trusts which include 936,255 shares; and
neither voting nor investment powers for one Trust which includes 906,667
shares. Additionally, Mr. Hillman is the beneficiary and Trustee of one of
the Trusts; beneficiary of two of the Trusts; and the Trustee of ten of the
Trusts. The other Trustees and beneficiaries of the Hillman Trusts are
neither officers nor directors of the Company.
(3) Includes 669,767 shares held directly by Howard B. Hillman; 6,599,152
shares owned by Venhill Limited Partnership of which Mr. Hillman is a
general partner; and 1,843,922 shares held by the Hillman Trusts. Excludes
an aggregate of 800 shares owned by Mr. Hillman's adult children, as to
which shares Mr. Hillman disclaims beneficial ownership.
(4) Howard B. Hillman is a general partner of Venhill Limited Partnership.
The following table sets forth, as of November 30, 1997, information with
respect to beneficial ownership of the Company's Common Stock by each director
of the Company, each of whom is a nominee for election as director, by each
named executive officer, and by the present directors and officers of the
Company as a group:
AMOUNT AND NATURE PERCENT
OF OF
TITLE OF CLASS NAME BENEFICIAL OWNERSHIP CLASS
- -------------- ---- -------------------- -----
Common Stock Howard B. Hillman 9,112,841(1) 98%
Major General William R. Usher,
USAF (Ret.) 200 *
J. Roderick Heller, III 2,300(2) *
Kenneth M. Dedeluk 8,125(2) *
Dewayn Davis 15,160(2)(3) *
Common Stock All current directors and officers
as a group (8 persons) 9,148,135(1)(2)(3) 98%
* Less than 1 percent.
(1) Includes 770,333 shares of Common Stock held of record by the Hillman
Trusts of which Howard B. Hillman is both a Trustee and a beneficiary;
166,922 shares of Common Stock held of record by the Hillman Trusts of
which Mr. Hillman is a Trustee but not a beneficiary and as to which he
disclaims beneficial ownership; 906,667 shares of Common Stock of which Mr.
Hillman is a grantor and neither a Trustee nor a beneficiary; 669,767
shares of Common Stock owned directly by Mr. Hillman; 6,599,152 shares
owned by Venhill Limited Partnership of which Mr. Hillman is a general
2
partner; and excludes an aggregate of 800 shares held by Mr. Hillman's
adult children, as to which shares Mr. Hillman disclaims beneficial
ownership.
(2) Includes stock options that will have vested by January 27, 1998.
(3) Includes 130 shares held by Ms. Susan Davis.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent
(10%) of a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission ("Commission") initial reports of ownership
and reports of changes in ownership of Common Stock and other equity securities
of the Company. Officers, directors, and greater than ten percent (10%)
shareholders are required by Commission regulation to furnish the Company with
copies of all Section 16(a) forms they file.
During the twelve months ended September 30, 1997, Mr. Hillman was six days
late in filing a Form 4 to report a debt-to-equity conversion. Otherwise, to
the Company's knowledge, based solely on a review of the copies of reports
furnished to the Company, the Company believes that all filings applicable to
its executive officers, directors, and ten percent (10%) beneficial owners
complied with applicable Commission regulations during the last fiscal year.
PERFORMANCE GRAPH
The following graph compares the Company's, the peer group's and the
Standard & Poors' 500 yearly percentage change in cumulative total shareholder
return for the past five years, as measured by dividing the (i) the sum of (A)
the cumulative amount of dividends for the measurement period, assuming dividend
reinvestment, and (B) the difference between the registrant's share price at the
end and the beginning of the measurement period; by (ii) the share price at the
beginning of the measurement period. The graph assumes that $100 was invested
on October 1, 1992 and that all dividends were reinvested.
For purposes of this Proxy Statement, the peer group, which Auto-trol
Technology Corporation considers to be its competitors, is made up of the
following five (5) companies: Altris Software, Inc.; Documentum, Inc.;
Structural Dynamics Research Corporation; Intergraph Corporation; and
ComputerVision Corporation. This is the same peer group that was used for
comparative purposes in the Company's Proxy Statement dated December 20, 1996,
except that Altris Software, Inc. and Documentum, Inc. were substituted for
Parametric Technology Corporation and Autodesk, Inc., which the Company no
longer considers its competitors because of the Company's change in market
focus.
[GRAPH]
AUTO-TROL PEER GROUP S&P 500
--------- --------- -------
1992 100 100 100
1993 25 97 107
1994 67 58 106
1995 50 154 134
1996 20 156 158
1997 23 142 217
3
PROPOSAL 1. ELECTION OF DIRECTORS
The Company's Bylaws provide that the Board of Directors shall consist of not
fewer than three persons. In accordance with the Bylaws, three directors are to
be elected to hold office until the next annual meeting of shareholders or until
their successors are duly elected and qualified. The proxies will be voted,
unless authority to do so is withheld, in favor of the nominees listed below,
all of whom comprise the current Board of Directors of the Company, each having
served in that capacity since the dates indicated. In the event any of the
nominees shall become unavailable, the persons named as proxies may vote for a
substitute nominee or vote for fewer than three directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES.
NOMINEES FOR DIRECTORS
Set forth in the following table is certain information regarding each
nominee for election as director of the Company:
BUSINESS EXPERIENCE FOR THE
PAST FIVE YEARS;
POSITION WITH THE COMPANY; YEAR BECAME DIRECTOR AND
NAME; AGE PRINCIPAL OCCUPATION OTHER DIRECTORSHIPS
- --------- -------------------------- ---------------------------
Howard B. President of the Company, Director of the Company
Hillman Chief Executive Officer and Chairman since 1973. President and
Age 63 of the Board of Directors. Chief Executive Officer of
the Company since 1985.
Private investor, Trustee
and beneficiary of certain
Hillman Family Trusts. Mr.
Hillman is also a director
of Hambrecht & Quist Group.
Major General Director of the Company. Consultant. Director of the Company
William R. since 1988. October 1997
Usher, USAF to present, self-employed
(Ret.) Consultant. September 1994
Age 64 through September 1997,
Director, Business
Development, Lockheed
Martin Corporation.
J. Roderick Director of the Company. Chairman Director of the Company
Heller, III and Chief Executive Officer of NHP since 1984. Chairman and
Age 60 Incorporated. Chief Executive Officer of
NHP Incorporated.
There are no arrangements or understandings between any of the above-listed
directors, or any other persons, pursuant to which any of the directors have
been selected as such.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the Company's last fiscal year, the Board of Directors met four times.
Messrs. Hillman, Heller, and Usher were present at all meetings. The Board of
Directors has an Audit Committee and a Compensation Committee, but does not have
a nominating committee.
The Audit Committee advises the Board of Directors with respect to (i) the
selection of independent certified public accountants, who annually audit the
books and records of the Company and its consolidated subsidiaries; (ii) the
scope of such audit; (iii) the adequacy of the financial statements prepared for
publication by management and the adequacy of the audits of such statements; and
(iv) the adequacy of the financial and accounting control procedures and the
financial management of the Company. The current members are Messrs. Hillman
and Heller. The Audit Committee did not meet separately from the Board of
Directors meetings during the twelve months ended September 30, 1997.
The Compensation Committee advises the Board of Directors with respect to
executive compensation, stock options and other forms of compensation. The
current members are Messrs. Usher and Heller. The Compensation Committee met
twice during the twelve months ended September 30, 1997. Messrs. Heller and
Usher attended both meetings of the Compensation Committee.
4
Each director who is not also an officer of the Company received $2,000 for
attending each of the scheduled meetings of the Board of Directors in fiscal
year 1997. Directors were reimbursed for travel expenses for attending the
Board Meetings. During the 1997 fiscal year, Messrs. Heller and Usher were both
given an opportunity to surrender their previously granted options for 500
shares of Common Stock on January 2, 1995 with an exercise price of
$10.00/share, for a new grant for 5,000 shares on June 6, 1997 with an exercise
price of $1.56/share. Mr. Usher accepted the reprice on November 5, 1997 and
Mr. Heller retained his previous grant.
OFFICERS
Set forth below is a description of the present executive officers and
officers of the Company except for Mr. Hillman, President, Chief Executive
Officer and Chairman of the Board, who is described above. All officers of the
Company hold office until their successors are appointed by the Board of
Directors. There are no arrangements or understandings between any of the
officers listed below, or any other persons, pursuant to which any of the
officers have been selected as such.
KENNETH M. DEDELUK - VICE PRESIDENT OF INTERNATIONAL OPERATIONS, AND PRESIDENT
OF AUTO-TROL TECHNOLOGY (CANADA) LTD.
Mr. Dedeluk, age 47, joined Auto-trol Technology (Canada) Ltd., a wholly-
owned subsidiary of Auto-trol Technology Corporation, in 1976. In 1981, Mr.
Dedeluk became Vice President and General Manager of Canadian Operations. In
1989 he was appointed President of Auto-trol Technology (Canada) Ltd., and in
June of 1993 Mr. Dedeluk was appointed Vice President of International
Operations of the Company.
MARY LOUISE SCHWAB CPA - VICE PRESIDENT, TREASURER, AND CHIEF FINANCIAL OFFICER
Ms. Schwab, age 42, joined the Company in August 1995, as Controller. On
September 23, 1996, Ms. Schwab was appointed Vice President, Treasurer and Chief
Financial Officer. Prior to her employment with the Company, Ms. Schwab was
Division Controller for DOVatron International, Inc. of Boulder, Colorado from
January 1994 to February 1995. She was Corporate Controller for Somatogen, Inc.
of Boulder, Colorado from November 1991 to January 1994, and was Vice President
of Finance for Generation 5 Technology, Inc. of Westminster, Colorado from
January 1989 through October 1991.
DEWAYN DAVIS - VICE PRESIDENT
Mr. Davis, age 41, joined the Company in 1984, initially as an Applications
Engineer. He entered the Company's sales force in 1987 and was shortly
thereafter promoted to Regional Sales Manager. In January, 1993 Mr. Davis was
promoted to Director of Western Area Field Operations, and was appointed Vice
President of the Company effective September 8, 1994.
ALLYSON S. KISSELL - SECRETARY
Ms. Kissell, age 49, joined the Company in 1984, and has held various
positions with the Legal Department during her employment with the Company,
including her appointment as Assistant Secretary in 1987. In addition to
managing the Legal Department, Ms. Kissell is also the manager of the
Documentation and Training Services and Facilities Administration Departments.
Ms. Kissell was appointed Secretary of the Company effective September 16, 1992.
5
VALERIE R. GAUTREAUX - ASSISTANT SECRETARY
Ms. Gautreaux, age 47, has worked in various capacities, including Contract
Administrator, in the Legal Department since joining the Company in 1987. She
was appointed Assistant Secretary of the Company on October 24, 1996.
EXECUTIVE COMPENSATION
REPORT FROM THE COMPANY'S COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors has reviewed executive
compensation and concluded that salaries for executive officers should not be
based upon Company performance. Salary determination is based on a combination
of factors including evaluation of compensation for executive positions within
the industry, as well as the individual's past performance, education, job
responsibilities and future potential with the Company.
For its evaluation of compensation, the Committee did not rely on specific
data from specific companies within the systems integration industry, but
rather, on its broad understanding of competitive salaries for comparable
executive positions. Based on this approach, there is no direct relationship
between other companies and the broad industry "norms" used by the Committee in
their deliberations regarding Company executive compensation.
The objective of the Committee is to determine salaries that are sufficient
to attract, motivate and retain executives of outstanding ability and potential.
The Committee further attempts to establish a relationship between executive
compensation and the creation of shareholder value. These objectives are
achieved by providing a combination of cash compensation and stock option
grants. Options are granted to executives based on subjective performance
evaluation and not the attainment of specific performance goals.
All of the above factors and policies were considered in determining the
compensation of Mr. Hillman, President and Chief Executive Officer of the
Company. However, in May 1991, Mr. Hillman voluntarily lowered his salary to
its present level and has again asked the Compensation Committee not to increase
his salary this fiscal year.
/s/ Major General William R. Usher, USAF (Ret.) Director
- -----------------------------------------------
Major General William R. Usher, USAF (Ret.)
/s/ J. Roderick Heller, III Director
- -----------------------------------------------
J. Roderick Heller, III
The following Summary Compensation Table sets forth the salary, bonus and
other compensation earned during the last three fiscal years by Howard B.
Hillman, the Company's Chief Executive Officer, and by the other two executive
officers of the Company whose aggregate compensation for that year exceeded
$100,000. No stock appreciation rights were granted to the named executive
officers for the years indicated.
6
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
-----------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------- ------------------ -------
ALL RESTRICTED
OTHER ANNUAL STOCK OPTIONS LTIP
NAME AND PRINCIPAL FISCAL SALARY BONUS COMPENSATION AWARD(S) GRANTED PAYOUTS
POSITION YEAR ($) ($)(1) ($) ($) (SHARES) ($)
------------------ ------ ------ ------ ------------ ---------- -------- -------
Howard B. Hillman 1997 $ 100,000 $240 - N/A - N/A
President and Chief 1996 100,000 240 - N/A - N/A
Executive Officer 1995 100,000 240 4,401(2) N/A - N/A
Kenneth M. Dedeluk* 1997 128,561 217 3,041(3) N/A 35,000 N/A
President, Auto-trol 1996 128,561 220 3,084(3) N/A 15,000 N/A
Technology (Canada) Ltd. 1995 122,724 218 2,887(3) N/A 2,000 N/A
Dewayn Davis 1997 122,991 120 - N/A 40,000 N/A
Vice President 1996 116,991 110 - N/A 28,000 N/A
1995 110,242 240 - N/A 4,500 N/A
* Compensation is paid in Canadian dollars for Mr. Dedeluk. The amount shown
here is restated in U.S. dollars.
(1) This column reflects compensation to named executive officers under the
Company's 401(k) Retirement Plan; except as to Mr. Dedeluk, where the
amount represents compensation in the form of contributions from Auto-trol
Technology (Canada) Ltd. through its Registered Retirement Savings Plan.
(2) This total for 1995 includes $3,762 for rent, $268 for telephone, and $371
for utilities.
(3) This total is for car allowance.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The two members of the Company's Compensation Committee, Mr. Usher and Mr.
Heller, have no interlocking relationships as defined by SEC rules and
regulations.
STOCK OPTIONS AND OTHER PLANS
The Company has an Incentive Stock Option Plan ("ISO Plan"), a Special
Purpose Stock Option Plan ("SPSO Plan") and an Employee Stock Purchase Plan
("ESP Plan"). The Board of Directors may from time to time alter, amend,
suspend or discontinue the ISO Plan, the SPSO Plan and the ESP Plan, except that
the Board may not take action which adversely affects the rights and obligations
with respect to stock options outstanding under the Plans. The Board may not,
without approval of the shareholders: (i) increase the maximum number of shares
of Common Stock that may be made subject to options under any of the Plans; (ii)
materially increase the benefits accruing to participants under any of the
Plans; or (iii) materially modify the requirements as to eligibility for
participation in any of the Plans.
As amended by the shareholders in January 1992, the ISO Plan and the SPSO
Plan options were pooled, combining the number of shares available for grant
under both Plans. In January of 1996, the Plans were each amended to restate
the number of shares available for grant collectively under the Plans to
400,000, reflecting the Company's one-for-ten reverse stock split. A proposal
to amend the ISO Plan and the SPSO Plan to increase the number of shares
available for issuance under these Plans is being submitted to shareholders for
approval at the Annual Meeting. See Proposal 2.
Any shares of Common Stock which were subject to Stock Options, but for which
such Stock Options have expired, shall again be available for purposes of
granting Stock Options under the ISO Plan and the SPSO Plan. As of September
30, 1997, a total of 89,194 options for shares of Common Stock remained
available for grant collectively under these Plans.
7
INCENTIVE STOCK OPTION PLAN
Under the ISO Plan, Key Employees are granted options to purchase Common
Stock of the Company at a per share price equal to the fair market value of a
share of Common Stock on the date that the option is granted. Almost all of the
Company's approximately 246 employees could qualify as Key Employees. The
Compensation Committee determines the optionees, the number of shares covered by
the options, and the exercise price of options granted under the ISO Plan.
Compensation Committee members are not eligible to receive options under the ISO
Plan.
A copy of the ISO Plan is available upon shareholder request.
SPECIAL PURPOSE STOCK OPTION PLAN
The SPSO Plan was adopted in 1981, approved by the shareholders in 1982,
revised in 1994, and revised again in 1995. Under the SPSO Plan, options are
granted at the fair market value of the shares on the date of grant. The
Compensation Committee determines the optionees, the number of shares covered by
the options, and the exercise price of the options granted under the Plan. The
options granted and to be granted under the SPSO Plan are not "incentive" stock
options which meet the requirements of Section 422A of the Internal Revenue Code
of 1986, as amended. Compensation Committee members are eligible to receive
options under the SPSO Plan.
A copy of the SPSO Plan is available upon shareholder request.
OPTION REPORTING REQUIREMENTS
The following table discloses options to purchase Common Stock granted from
October 1, 1996, through September 30, 1997, under the ISO Plan and the SPSO
Plan, to Messrs. Dedeluk and Davis, the only named executive officers referred
to in the Summary Compensation Table who were granted stock options during that
period.
OPTION GRANTS TABLE*
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
OPTION TERM
----------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES EXERCISE
GRANTED IN FISCAL PRICE EXPIRATION 5% 10%
NAME ($)/SH(1) YEAR 1997 ($)/SH(1) DATE ($)/SH(1) ($)/SH(1)
---- ---------- ---------- --------- ---------- --------- ---------
Kenneth M.
Dedeluk 15,000 9.45 3.00 1/3/07 28,300 71,718
20,000 26.77 1.56 6/6/07 19,622 49,725
Dewayn Davis 40,000 25.2 3.00 1/3/07 75,467 191,249
* SEC regulations require disclosure of stock appreciation rights ("SARs")
issued; however, Auto-trol Technology Corporation has not granted any SARs.
(1) Actual gains on exercise, if any, are dependent upon the future performance
of the Company's Common Stock.
8
Under either the ISO Plan or the SPSO Plan, options become exercisable in five
cumulative annual installments of twenty percent (20%) per year, and remain
exercisable until the option expires. A change of ownership of the Company may
accelerate the vesting schedule of the options. An unexercised option generally
expires on the tenth anniversary of the date on which it was granted, or thirty
(30) days after termination of the employment, or six months after the death or
disability, of the optionee. The exercise price on the date of grant may be
paid either in cash or at the discretion of the Compensation Committee by
delivery of shares of the Company's Common Stock previously purchased, valued at
the market price as of the date such shares are tendered to the Company. The
Compensation Committee may, in its discretion, establish provisions for the
exercise of stock options different from those described in this paragraph. No
named executive officer exercised any stock options in fiscal year 1997.
The following table discloses information regarding the reprice of
previously granted options held by the named executive officers during the 1997
fiscal year.
The Board of Directors determined that there were stock option grants that
may be failing to serve as incentives to key employees because the then current
market value of the Company's stock was notably less than the exercise price for
such stock options. Therefore, all previous option grants that had an exercise
price below the market price of the Company's Common Stock on January 3, 1997
could be surrendered for a new grant of the same quantity at an exercise price
of $3.00/share.
TEN-YEAR OPTION REPRICING
LENGTH OF
MARKET ORIGINAL
NUMBER OF PRICE OF EXERCISE OPTION
SECURITIES STOCK AT PRICE AT NEW TERM
UNDERLYING TIME OF TIME OF EXERCISE REMAINING AT
OPTIONS REPRICING REPRICING PRICE DATE OF
NAME DATE REPRICED ($)/SH ($)/SH ($)/SH REPRICE
---- ---- ---------- --------- --------- -------- ----------
Kenneth M. Dedeluk 1/3/97 5,000 $3.00 $3.75 $3.00 -6.5 years
1/3/97 2,000 $3.00 $10.00 $3.00 -8 years
1/3/97 15,000 $3.00 $6.875 $3.00 -9 years
Dewayn Davis 1/3/97 25,000 $3.00 $3.75 $3.00 -6.5 years
1/3/97 4,500 $3.00 $10.00 $3.00 -8 years
1/3/97 28,000 $3.00 $6.875 $3.00 -9 years
9
The following table discloses the options held by the named executive
officers at the end of the last fiscal year.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR END OPTION VALUE TABLE
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-THE-
UNDERLYING UNEXERCISED MONEY OPTIONS AT FISCAL
OPTIONS AT FISCAL YEAR END YEAR END ($)
SHARES ACQUIRED VALUE -------------------------- ----------------------------
NAME ON EXERCISE REALIZED VESTED UNEXERCISABLE VESTED UNEXERCISABLE
---- --------------- -------- ------ ------------- ------ -------------
Howard B. Hillman - - - - $- $-
Kenneth M. Dedeluk - - 0* 57,000 0 142,500
Dewayn Davis - - 0* 75,000 0 225,000
*In January, 1997, both Mr. Dedeluk and Mr. Davis elected to surrender all their
outstanding vested options in order to be eligible for an option reprice.
EMPLOYEE STOCK PURCHASE PLAN
The Company's Employee Stock Purchase Plan ("ESP Plan") became effective in
1980, and is administered by two members of the Board of Directors (the
"Committee"). Almost all full-time employees who have been with the Company for
at least six months and who work seventeen and one-half hours (17 1/2) per week
are entitled to participate in the ESP Plan. The purchase period for the ESP
Plan begins on March 1 and ends October 31, for each calendar year. All
employees who wish to participate in the ESP Plan must re-enroll at the
beginning of each purchase period.
An employee may purchase stock equal to the lesser of ten percent (10%) of
his annual salary, or the number of shares authorized by the Committee. The ESP
Plan allows employees to purchase Common Stock at the lesser of either full
market price, or at a five percent (5%) discount of the fair market price of the
stock at the beginning of the purchase period, or at a five percent (5%)
discount of the fair market price when the stock is purchased.
No shares of Common Stock were acquired under the ESP Plan from October 1,
1996 through September 30, 1997 by the named executive officers. During fiscal
year 1997 an aggregate of 744 shares were purchased by employees of the Company
pursuant to the ESP Plan.
A copy of the ESP Plan is available upon shareholder request.
RETIREMENT SAVINGS PLAN
The Company's Retirement Savings Plan (the "Retirement Plan") is a cash or
deferred profit-sharing plan designed to comply with the requirements of Section
401(a) and 401(k) of the Internal Revenue Code of 1986, as amended. All
employees of the Company may participate in the Retirement Plan, provided that
they have six months of service with the Company. The Retirement Plan is
administered by a committee appointed by the Board of Directors.
Funds of the Plan are held, invested and administered by an independent
company. Plan funds may not be invested in Common Stock of the Company.
10
Under the Plan, employees may contribute an amount equal to up to fifteen
percent (15%) of their compensation per pay period, subject to statutory limits,
to a tax deferral account. The percentage of compensation that may be
contributed by the highly compensated employees under the Internal Revenue Code
depends on the average percentage of compensation contributed by the non-highly
compensated employees.
The Company will contribute, to the employee's account, an amount equal to
the employee's contribution, up to ten dollars ($10) per pay period. The value
of an employee's account is payable to the employee or the employee's
beneficiary upon the employee's retirement, voluntary or involuntary termination
of employment, death, or disability. Prior to such time, withdrawals may only
be made for financial hardships as defined by the Internal Revenue Code and
Regulations.
The Board of Directors may, in its discretion, terminate the Retirement Plan
at any time, in whole or in part. Upon such termination, the Plan provides for
the distribution of the assets of the fund for the benefit of its participants.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal year 1997 the Company borrowed $1,000,000 from Howard B.
Hillman, President, CEO, and a director of the Company, and $7,075,000 from the
Venhill Limited Partnership ("Venhill"), of which Mr. Hillman, the general
partner, has voting and investment powers. In March 1997 the Board of Directors
approved the conversion of $4,700,000 of the debt to Venhill for 1,566,667
shares of Common Stock. The $3.00 price per share for the March 1997 conversion
approximates the market bid price at the date of conversion. The Company's
related party debt activity for the fiscal year ending September 30, 1997 is as
follows:
Note payable balance as of October 1, 1996 $ 1,900,000
Additional amount borrowed 8,075,000
Amount paid (300,000)
Amount converted to Common Stock by Venhill (4,700,000)
-----------
Note payable balance as of September 30, 1997 $ 4,975,000
-----------
-----------
The notes outstanding to both Mr. Hillman and Venhill are payable October 1,
1999 and bear interest at ten percent (10%). Interest payable relating to this
debt was approximately $355,900 as of September 30, 1997 of which $131,100 is
due to Howard B. Hillman and $224,800 is due to Venhill.
11
PROPOSAL 2. APPROVAL TO AMEND THE COMPANY'S
OPTION PLANS
AMENDMENT TO INCREASE THE NUMBER OF SHARES AVAILABLE FOR GRANT UNDER THE
COMPANY'S STOCK OPTION PLANS
The shareholders will be asked to approve a proposal to amend the Company's
Special Purpose Stock Option Plan and Incentive Stock Option Plan ("the Plans")
to increase the number of shares of Common Stock collectively available for
grant under the Plans. The amendments, if approved, would provide a maximum of
1,000,000 shares of Common Stock available for grant collectively under the
Plans.
The Company's Special Purpose Stock Option Plan Section 5.1 will be amended
to read as follows:
5.1 MAXIMUM NUMBER
The maximum, aggregate number of shares of Common Stock that may be
made subject to Stock Options granted under the Plan shall be one
million (1,000,000) under this Plan and the Company's Incentive
Stock Option Plan, as determined from time to time to be
appropriate by the Compensation Committee. In no event shall the
total amount of shares for which options are granted under both
Plans exceed 1,000,000 shares. If any shares of Common Stock
subject to Stock Options are not purchased or otherwise paid for
before such Stock Options expire, such shares may again be made
available for Stock Option grant.
The Company's Incentive Stock Option Plan contains the same section 5.1
which will be amended to read as follows:
5.1 MAXIMUM NUMBER
The maximum, aggregate number of shares of Common Stock that may be
made subject to Stock Options granted under the Plan shall be one
million (1,000,000) under this Plan and the Company's Special
Purpose Stock Option Plan, as determined from time to time to be
appropriate by the Compensation Committee. In no event shall the
total amount of shares for which options are granted under both
Plans exceed 1,000,000 shares. If any shares of Common Stock
subject to Stock Options are not purchased or otherwise paid for
before such Stock Options expire, such shares may again be made
available for Stock Option grant.
12
OUTSTANDING OPTION GRANTS
BACKGROUND
The Company has a Special Purpose Stock Option Plan and an Incentive Stock
Option Plan (the "Plans"), which provide for the grant of Stock Options to Key
Employees and members of the Board of Directors in order to advance the
interests of the Company and its participating subsidiaries through the
motivation, attraction and retention of Board members and Key Employees.
REASON FOR THE ACTION
As of September 30, 1997, there were 89,194 shares of Common Stock
remaining available for grant under the Incentive Stock Option Plan and the
Special Purpose Stock Option Plan collectively. The number of shares remaining
available for grant under the Plans is insufficient to continue to meet the
goals of the Plans.
BOARD RECOMMENDATION
Based on the foregoing consideration, the Board of Directors approved an
amendment to the Company's Special Purpose Stock Option Plan and Incentive Stock
Option Plan to increase the number of shares available for grant collectively
under the Plans.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF THE
COMPANY VOTE FOR THE PROPOSAL.
VOTE REQUIRED FOR APPROVAL OF THE PROPOSAL TO AMEND THE COMPANY'S SPECIAL
PURPOSE STOCK OPTION PLAN THE INCENTIVE STOCK OPTION PLAN TO INCREASE THE NUMBER
OF SHARES OF COMMON STOCK AVAILABLE FOR GRANT COLLECTIVELY UNDER THE PLANS.
The shareholders will be asked to approve the proposal to amend the
Company's Incentive Stock Option Plan and Special Purpose Stock Option Plan, to
increase the number of shares collectively available for grant under the Plans,
at the Annual Meeting of Shareholders on January 27, 1998.
The affirmative vote of the majority of the shares entitled to vote,
represented in person or by proxy, will be necessary to approve the proposal.
Approval is assured since the Hillman entities intend to vote in favor of the
proposal.
OTHER MATTERS
The items discussed above are the only items of business, other than routine
procedural matters, which management intends to present or is informed that
others intend to present, for action as to which proxies received or presented
at the meeting are to be used. However, if other matters are properly presented
at the meeting, proxies named by the Board of Directors will vote the shares
represented by them in accordance with the recommendations of the Board of
Directors of the Company.
13
RELATIONSHIPS WITH INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Company retained KPMG Peat Marwick as its independent certified public
accountants effective 1990, and they have been selected to continue in such
capacity for the current fiscal year.
Representatives of KPMG Peat Marwick are expected to attend the Annual
Meeting, will have an opportunity to make a statement if they desire to do so,
and are expected to be available to respond to appropriate questions.
FINANCIAL STATEMENTS
Consolidated financial statements for the Company are included in Auto-
trol Technology Corporation's Annual Report on Form 10-K, which has been filed
with the Securities and Exchange Commission. A copy of this Report may be
obtained without charge upon written request directed to Ms. Allyson S. Kissell,
Secretary, 12500 North Washington Street, Denver, Colorado 80241-2400.
By Order of the Board of Directors
Allyson S. Kissell
SECRETARY
Denver, Colorado
December 22, 1997
14
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
AUTO-TROL TECHNOLOGY CORPORATION
FOR MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 27, 1998
The undersigned hereby appoints Howard B. Hillman and Allyson S. Kissell and
each of them, each with full power to act alone and each with full power of
substitution, as proxies to vote all the shares of Common Stock of Auto-trol
Technology Corporation held of record by the undersigned on December 9, 1997,
which the undersigned is entitled to vote at its annual meeting of shareholders
to be held on January 27, 1998, and any adjournment thereof, upon the following
matters as set forth in the Notice of said meeting and Proxy Statement dated
December 22, 1997, copies of which have been received by the undersigned.
The Board of Directors recommends that all shareholders vote on the following:
1. Election of three (3) Directors:
Nominees: J. Roderick Heller, III, Howard B. Hillman, Major
General William R. Usher (Ret.)
/ / FOR / / AGAINST
FOR, except vote withheld from the following nominee(s)
- ----------------------------------
2. The approval and adoption of a proposal to amend the Company's Special
Purpose Stock Option Plan and Incentive Stock Option Plan to increase the number
of shares of Common Stock available for grant collectively under the Plans.
/ / FOR / / AGAINST / / ABSTAIN
(IMPORTANT-CONTINUED ON REVERSE SIDE)
3. Such other business as may properly come before the meeting.
IMPORTANT: Please sign exactly as your name appears hereon. Where shares are
held by joint tenants, both should sign. When signing as attorney,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
person.
Date:
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Signature
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Signature if held jointly
Mark here for address change
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PLEASE RETURN USING ENCLOSED ENVELOPE